Mr. Market And A Valuation Of The Dow For Value Investors – January 2017

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Mr. Market’s Mental State

Legendary value investor Benjamin Graham is probably most famous for his Mr. Market parable.  In the story, an investor is greeted each day by Mr. Market, who offers to purchase the investor’s stocks.  Every offer is different, and sometimes the price is insanely high, sometimes it seems fair, and other times it is clearly too low.  But one thing remains the same – the intrinsic value of the investments does not change.  As a result, the investor is left to decide when to buy and sell based on the relationship between the intrinsic value and the price Mr. Market is offering.

All value investors today should keep the analogy in mind, and implement the overall concept.  To assist in that goal, ModernGraham has various tools available, and the infographic shown above is one of them, displaying a summary of the valuations of 619 companies reviewed by ModernGraham.

This month, out of the 619 companies reviewed by ModernGraham, the average PEmg ratio (price over normalized earnings) is 24.80 and the average company is trading at 93.6% of its intrinsic value.  Last month, the average PEmg ratio was 24.56 and the average company was trading at 93.20% of its intrinsic value.

The highest PEmg average we have seen while tracking this information was 26.17 in December 2014 while the lowest PEmg average was 22.25 in February 2016.  The highest average intrinsic value was 93.6% in January 2017 and the lowest average intrinsic value was 79.54% in February 2016.

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Disclaimer: The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 ...

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Carol W 3 years ago Contributor's comment

how did you get $WMT so low on price? it was on your Graham list D&E only recently... what changed? Conversely, how can you get a 320 price on $TRV? it has been downgraded due to valuation recently... cheers

Benjamin Clark 3 years ago Author's comment

I think you must have me confused with someone else. I've had the value listed for $WMT as the same since May 2016. Nothing has changed.

Please visit my site to learn more about how I got the price on $TRV. The link to the TRV valuation provides more detail.

Carol W 3 years ago Contributor's comment

$WMT is worth 39 a share? How did you get that?

Chee Hin Teh 3 years ago Member's comment

thanks for sharing. Happy new year